08 Dec Individual Tax changes 2014/2015
Income Tax Allowances
The standard personal allowance will increase to £10,000 from 6 April 2014, but the age allowances for those born before 6 April 1948 are frozen.
Allowances for 2014/15 are…
Personal allowance (born after 5 April 1948): £10,000
Personal allowance (born between 6 April 1938 and 5 April 1948): £10,500
Personal allowance (born before 6 April 1938): £10,660
Minimum married couples allowance*: £3,140
Maximum married couples allowance*: £8,165
Blind person’s allowance: £2,230
Income limit for allowances for age related allowances: £27,000
Income limit for standard allowances: £100,000
* given where one partner was born before 6 /4/1935, as 10% reduction in tax due.
Transferable Married Couples Allowance
From 6 April 2015 married couples and civil partners will be able to transfer up to £1,000 of their personal allowance to their spouse. This amount will increase if the total personal allowance increases year on year. However, the transfer can only take effect if both members of the couple are basic rate taxpayers or pay no income tax for the year.
Tax Rates and Thresholds
The income tax bands for 2014/15 are:
Savings rate* (10%) – 0 to £2,880
Basic rate (20%) – 0 to £31,865
Higher rate (40%) – £31,866 to £150,000
Additional rate (45%) – over £150,000
*The savings rate of 10% only applies if the individual’s net non-savings income does not exceed the savings rate limit. The higher rate and basic rate thresholds can be increased by paying personal pension contributions or gift aid donations.
Currently individuals can claim tax relief on interest paid on loans which are used to invest in UK companies in which they have a significant interest, employee-controlled companies and partnerships in which the individual is a partner. From 6 April 2014 this tax relief will also be available if the company is resident outside the UK, but within the European Economic Area. The interest relief will still be capped at the greater of £50,000 and 25% of the taxpayer’s income for the year.
State Pension Age
The State Pension Age (SPA) is currently being aligned at 65 for men and women who are reaching that age in the next few years. The SPA will then rise for both men and women to 66, and increase to 67 for those that reach that age between 2034 and 2036. The government is reviewing how quickly the state pension age should be changed. It is likely to accelerate the SPA to age 67, 68 and then to 69 for people who are currently in their early 30’s.
NI Contributions Over SPA
Individuals who retire today must have an NI contributions record showing 30 full years of contributions in order to receive the full state pension. However, once a person reaches state pension age (SPA) they are barred from making further NI contributions, even voluntarily.
From October 2015 the government will permit people who have reached SPA to make voluntary NICs to top up their NI contributions record for state pension purposes. This will apply to people who reach SPA before 6 April 2016.
The tax free ISA investment limits for 2014/15 are as follows:
Shares and cash ISA – £11,880
Cash only ISA – £5,940
Junior ISA and Child Trust Fund – £3,840